Substituted purchasers allow certian relatives to be added to the purchase.

Buyers who wish to add their spouse or family member to a contract can do so without having to pay thousands in extra stamp duty.

I commonly receive calls from agents seeking advice on how to add a buyer’s spouse or family member to the contract, so below, I will explain how a substituted purchaser application can be used to do this without causing the buyer to incur extra stamp duty.

Normally, if a buyer wishes to add another person to the transaction after the Offer and Acceptance has been accepted, the buyer will need to pay the original stamp duty amount plus the stamp duty required to transfer part of the property to the second person (for example, if Jess wishes to add David to the contract with a 25% share in the property, then 25% extra stamp duty will be charged).

Fortunately, section 42 of the Duties Act 2008 allows buyers to bypass this extra cost, provided the person they want to add is their spouse, sibling, parent, or certain other family members.

The ability to add these people is useful in a variety of situations, such as:

  • When the bank has informed the buyer that they will not be able to borrow the required amount of money, unless they buy in conjunction with their partner or family member,
  • If two related parties purchasing together wish to change their shares from those specified on the contract (eg. they may wish to change from 50/50 ownership to 30/70), or
  • If, for whatever reason, the buyer can no longer buy the home but will have their parent, child, sibling or spouse buy the property under the same contract.

To add one of these people to the contract, the buyer and the new transferee will need to complete a Substituted Transferee Application Form, which we will keep as a record of the change.

Note: This process can also be applied to trusts and corporations in certain circumstances, but this is a little more complex. For more information about substituted purchasers, see the Department of Finance’s website.

Image by Ding Yuin Shan via Flickr.

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